Sovereign CDS spreads have been tightening.
Italy’s bond auction was a success.
Even Greek bond spreads have been relatively calm.
And yet…the euro keeps tumbling.
So what’s troubling the market?
For one thing, there are repeated stories of mass gold purchases in Germany.
Secondly, there’s a truly bizarre rumour doing the rounds that German officials have already prepared for a “plan B” contingency involving the return of the Deutsche Mark as soon as this weekend.
Now, BEFORE we all have a COMET MOMENT here, we should state at the outset that this comes from a COMPLETELY dubious and questionable source – namely a posting by a supposed Deutsche Bank employee on a whacky conspiracy website.
(NOTE TO the MONEY MARKETS: the following is NOT TRUE. Probably.)
The post reads as follows:
I’m working at the Deutsche Bank in Germany. Today we delivered 1 container with new Deutsche Mark notes and new coins. I will present a photo from the new banknotes tomorrow morning. The curencychange will be the night from Saturday to Sunday 5/16/2010. On Friday, 19.00 GMT Angela Merkel the germany chancelor, will speach to the german nation.
Other threads on the same site range from: “BREAKING: US representative confirms – “The president Eisenhower met aliens!!” and “SATURN lost its rings, and I think Jupiter’s moon crashed into it. Go check. This is serious. Something is happening out there.”
So money market operatives should know its unlikely to be true. Even. Maybe.
Of course, Zero Hedge has added fuel to the fire by posting this from guest contributor The Prudent Investor on Wednesday:
A web page of precious metals prices provider Kitco.com has sparked rumors that Germany will leave the Eurozone and reintroduce German Marks, sending gold to a new record of $1,244 and silver to a multi-year high of $19.64. It is this half-ready page shown below that has created excitement as it lists precious metals in Deutschmark units.
People, we hate to break it to you. But we have it confirmed.
This is an old ghost page of Kitco’s from before the launch of the euro. Still live on the web, but no longer updated.
There is nothing to see here. You can go about your business as normal. If Germany does have a plan B, it’s very unlikely to involve a relaunch of the Deutsche Mark this weekend.
Of course, one reason the rumour may have penetrated market consciousness deeper than usual could be related to Morgan Stanley’s April research note which somewhat legitimized talk of a German exit from the euro:
The bail-out and the ECB’s softer collateral stance set a bad precedent for other euro area member states and make it more likely that the euro area degenerates into a zone of fiscal profligacy, currency weakness and higher inflationary pressures over time. If so, countries with a high preference for price stability, such as Germany, might conclude that they would be better off with a harder but smaller currency union.
But we still don’t think that’s something that could be arranged as soon as this weekend.
Related links:
Quick, run for the Goldschläger! – FT Alphaville
Five things RBS doesn’t like about the Drachmark – FT Alphaville
Towards a United States of Europe – FT Alphaville
Gold hits all-time high as investors seek haven – FT